Interim Results
Interim Results for the half year ended 30 June 2002
TT electronics, a world leader in resistor and sensor technology, today
announces its interim results
KEY POINTS
* Group revenues from ongoing activities were £265.3 million compared
to £273.1 million in the second half of 2001.
* Operating profit from continuing activities before goodwill
amortisation was £13.1 million - in line with the second half of 2001.
* Interim dividend of 3.69p per share (2001: 3.69p per share).
* Sales to the automotive markets continue to grow.
* Depressed telecom market mirrors the second half of 2001.
* Improved performance from the electrical sector.
* Strong balance sheet with low borrowings.
* Sales drive into new market sectors achieving success with new
orders already announced worth £32 million won in the defence market.
John Newman, Executive Chairman said today:
"We continue to benefit from the demand for automotive electronics - the
largest single market for our electronic components and products. We
are currently expanding our German manufacturing facilities to meet
higher volumes - the result of our continued success in winning new
contracts.
"We are exploring a number of potential acquisitions and are well
positioned with a strong balance sheet and low gearing to take advantage
of attractive opportunities as and when they arise.
"Although overall trading conditions are unlikely to improve in the
second half of the year, we will maintain our firm control of costs and
are ready to react quickly to new opportunities."
10th September, 2002
Enquiries:
TT electronics plc Tel: 01932 856647
John W Newman, Executive Chairman
Biddicks Tel: 020 7448 1000
Zoe Biddick
Group Financial Highlights
Half year Half year Half year
30 June 31 December 30 June
2002 2001 2001
£ million £ million £ million
Turnover - total 265.3 289.2 368.7
- discontinued activities - (1.4) (25.8)
- continuing activities 265.3 287.8 342.9
- ceased activities - copper rod - (14.7) (21.4)
Turnover - ongoing activities 265.3 273.1 321.5
excluding copper rod
Operating profit before goodwill
amortisation
- continuing activities 13.1 13.0 23.7
- discontinued activities - (0.1) 1.6
Operating profit before goodwill 13.1 12.9 25.3
amortisation
Profit on ordinary activities
before tax,amortisation of goodwill 11.3 10.3 21.8
and exceptional items
Earnings per share - basic and 4.8p 3.6p 8.6p
fully diluted
Dividends per share 3.69p 6.36p 3.69p
Shareholders' funds 222.6 222.1 227.2
Chairman's statement
TT electronics' turnover for the first half of the year was £265.3
million, compared with £368.7 million in 2001. The reduced level of
turnover was primarily due to the demerger and sale of the company's
principal non-electronic and electrical activities, and the closure of
the jointly owned copper rod production facility as reported in my last
year's Chairman's statement. In the second half of 2001, turnover of the
group's present activities was £273.1 million.
Operating profit before amortisation of goodwill was £13.1 million
compared to £13.0 million in the second half of 2001 and £23.7 million
in the first half of 2001 for continuing activities. The charge for
amortisation of goodwill of £1.1 million is the same as in the previous
year. Basic and fully diluted earnings per share were 4.8p, compared
with 8.6p after a tax charge of 27 per cent (2001-28 per cent). There
were no exceptional items in the period. The group has followed the
policy that costs incurred as the result of reductions in the workforce
and reorganisations are an ongoing cost of our business.
I am pleased to report that TT electronics continues to have a strong
balance sheet. The group's reduced borrowing levels at the year end have
been maintained with total net indebtedness of £65.3 million at 30 June
2002, compared to £100.9 million at June 2001 and £63.5 million at
December 2001.
In the Electronic sector, sales to the automotive market continue to
grow with more of our electronic components being engineered into new
vehicle models. This improvement is expected to continue in the second
half of the year. The severe problems experienced by the telecom
industry have affected TT electronics' first half results. The Board's
decision to maintain skill levels in our telecom related businesses
remains under review in the light of the poor financial strength of the
telecom industry. Telecom recovery in the short term now seems unlikely.
The Electrical sector performance has improved, benefiting from cut-
backs made last year. The efforts made by our sales forces to generate
new business from other industrial sectors have begun to be successful.
We recently announced £32 million of orders for products where the
Ministry of Defence is the ultimate customer.
We have been exploring a number of attractive acquisition opportunities
with vendors' price expectations at lower levels than were experienced
eighteen months ago. As regards our twenty three per cent shareholding
in Johnston Group PLC, an investment we commenced in 1996, with the
support of other shareholders we called an Extraordinary General Meeting
in August to vote on the payment of a special dividend and disposal of
one of Johnston Group's divisions. Though the resolution was not passed
our aim is to maximise the value of Johnston Group for the benefit of
all shareholders.
The Board has decided to keep the interim dividend at 3.69p per share,
in line with last year. This dividend will be paid to shareholders on
the register on 18 October 2002 and will be payable on 31 October 2002.
Your Board considers that overall trading conditions are unlikely to
improve in the second half of the year, although there may be short term
enhancements due to shortages of components in logistical pipelines.
John W Newman
Executive Chairman
10 September 2002
Chief Executive's review
The difficult trading conditions experienced in the latter part of last
year have continued into the current year. The Electronic sector
benefited from growth in sales to the automotive industry, despite lower
production by some vehicle manufacturers. Sales to the telecom market
declined due to weak demand and the financial problems of service
providers. The Electrical sector improved its performance.
Despite some depressed markets we continue to invest in targeted product
development to widen the group's product range and market coverage.
Fundamental to this strategy is the focus on application engineering,
which uses our core technologies to enhance customers' products. This
investment in product development has won our participation in a number
of exciting new programmes with vehicle manufacturers and also secured
approval of our products for specified use in the telecom, computer and
industrial markets.
We continue to adjust costs in light of current circumstances and have
reduced overheads and headcount in the first half as well as continuing
our programme of transferring products with a high labour content to our
lower labour cost factories in Malaysia, Mexico, Barbados and India.
Electronic sector
Automotive market - represents 60 per cent of the electronic sector
turnover
In Europe two of our key customers BMW and Daimler Chrysler increased
production which enabled continuing growth for our drive-by-wire sensor
technology and other sensor components. This growth has been partially
offset by reduced demand for our steer-by-wire sensor for Fiat. However,
new programmes for this technology have been won and production will
grow in 2003. Currently we are enlarging one of the group's German
factories by a further 36,000 square feet to accommodate the equipment
for these new programmes and we continue to invest in automated
equipment to reduce product costs.
In North America the strong sales of General Motors' light truck and
sports utility vehicles has increased demand for our height sensors and
air conditioning units. New production programmes began this year at our
North Carolina factory. We have also won several new programmes with
Ford for fan speed controllers.
We continue to win new leading edge electronic automotive business in
both Europe and North America because of the close working relationship
of our engineers with major customers.
Telecom and Computer markets - represent 19 per cent of the electronic
sector turnover
The collapse of the telecoms industry which started in early 2001 has
been made worse by the problems of the service providers this year who
have cut back further on capital equipment expenditure. Our customers,
the global manufacturers of the infrastructure equipment, have therefore
had low demand for our products especially as the supply chain has not
completely emptied; this has had a detrimental effect on sales. Our
engineers have been successful in having a number of our new products
designed into the next generation equipment. We expect that the launches
of this new equipment will begin in 2003. Our total sales to the
computer industry declined due to an American customer moving production
away from our electronic manufacturing service company to an in-house
facility. New product introductions and a reduction of stock in the
supply chain succeeded in holding stable sales of our inductors and
resistors. Computer production has historically increased in the second
half year and having won a number of new 'design-ins' we believe
component sales will increase but margins will remain under pressure.
General Industrial - represents 21 per cent of electronic sector
turnover
Further emphasis has been placed on improving our penetration into the
aerospace, defence, medical and control instrumentation markets where we
see opportunities for growth. New business has been won, including a £20
million contract over the next four years to supply sub-assemblies for a
new military radio to the Ministry of Defence.
Electrical sector
In my last Chief Executive's review I commented on the cessation of the
manufacture of copper rod which has reduced low margin turnover by £36
million in a full year.
Power Generation - represents 28 per cent of electrical sector turnover
A large order for generators for a petroleum installation has been won
and will be delivered in the second half, but demand from the Far East
remains slow. However our Mexican operation continued its strong
performance. We have recently won two new contracts from the Ministry of
Defence totalling £12 million over the next four years for ground power
units and panel assemblies including connectors. Our specialist
uninterruptible power supply business is beginning to benefit from the
new product development undertaken over the last eighteen months.
Power Transmission - represents 72 per cent of electrical sector
turnover
The downsizing of the cable activities in the first half of last year
has improved overall profitability. However, we were expecting to
manufacture a large sub-sea cable this year but this is likely to be
delayed until 2003. The general cable market remains competitive
although cable accessories have maintained a good level of sales and
margin.
Outlook
The group is maintaining its commitment to product development and its
relationship with customers. This is the 'driver' behind the growth in
the automotive business. At this stage we acknowledge that it is
difficult to see how markets will develop overall in the second half.
However we will maintain our firm control of costs and be ready to react
quickly to new opportunities.
Sheridan W A Comonte
Chief Executive
Consolidated profit and loss account
For the six months ended 30 June 2002
Note 2002 2001 2001
Half year Half year Full year
£ million £ million £ million
Turnover 265.3 342.9 630.7
- continuing activities
- discontinued activities - 25.8 27.2
2 265.3 368.7 657.9
Operating profit 12.0 22.6 34.5
- continuing activities
- discontinued activities - 1.6 1.5
3 12.0 24.2 36.0
Operating profit before goodwill
amortisation
- continuing activities 13.1 23.7 36.7
- discontinued activities - 1.6 1.5
13.1 25.3 38.2
Exceptional items - (2.0) (4.1)
Profit on ordinary activities 12.0 22.2 31.9
before interest
Interest (1.8) (3.5) (6.1)
Profit on ordinary activities 10.2 18.7 25.8
before taxation
Taxation 4 (2.7) (5.3) (6.9)
Profit on ordinary activities 7.5 13.4 18.9
after taxation
Dividends - interim (5.7) (5.7) (15.6)
- in specie - (41.1) (41.1)
Retained profit/(loss) 1.8 (33.4) (37.8)
Earnings per share 5
- basic and fully diluted 4.8p 8.6p 12.2p
- before goodwill amortisation 5.5p 10.6p 16.0p
and exceptional items
Dividends per share 3.69p 3.69p 10.05p
Consolidated balance sheet
At 30 June 2002
Note 2002 2001 2001
30 June 30 June 31 Dec
£ million £ million £ million
Fixed assets
Intangible assets 35.3 40.3 38.1
Tangible assets 151.6 165.3 153.2
Investments 12.6 9.5 10.7
199.5 215.1 202.0
Current assets
Property 3.2 2.9 4.0
Stocks 101.0 122.6 99.1
Debtors 110.8 131.4 111.0
Quoted investments 0.1 1.2 0.1
Cash 9.7 8.3 8.8
224.8 266.4 223.0
Creditors: falling due within (134.0) (184.3) (132.6)
one year
Net current assets 90.8 82.1 90.4
Total assets less current 290.3 297.2 292.4
liabilities
Creditors: falling due after (58.8) (60.7) (60.8)
more than one year
Provisions for liabilities (6.3) (6.0) (6.9)
and charges
Minority interests (2.6) (3.3) (2.6)
Total net assets 222.6 227.2 222.1
Capital and reserves
Share capital 38.7 38.7 38.7
Reserves 183.9 188.5 183.4
Equity shareholders' funds 6 222.6 227.2 222.1
Consolidated cash flow statement
For the six months ended 30 June 2002
Note 2002 2001 2001
First First Full year
half half £ million
£ million £ million
Net cash inflow from operations
Operating profit 12.0 24.2 36.0
Non-cash items 14.8 17.4 33.9
- Depreciation and amortisation
- Other (2.5) (3.7) (7.4)
Movement in working capital (1.3) (16.0) 14.1
Net cash inflow from operating 23.0 21.9 76.6
activities
Net interest paid (1.7) (5.5) (8.1)
Taxation 0.5 (5.8) (7.4)
Capital expenditure and
financial investment
Purchase of fixed assets (12.9) (22.4) (35.4)
Purchase of fixed asset (1.9) -
investments
Sale of fixed assets and grants 0.5 1.5 5.7
received
Sale of businesses - 2.2 5.4
Demerger of business - 16.3 15.2
Ordinary dividends paid (9.8) (9.8) (15.6)
Net cash flow before use of
liquid
resources and financing (2.3) (1.6) 36.4
Financing and management of
liquid resources
Movement of current asset - (1.7) (1.7)
investments
Movement of loans and finance (1.6) 29.7 29.4
leases
(Decrease)/increase in cash 7 (3.9) 26.4 64.1
Notes to the financial statements
1. Basis of accounting
The interim financial statements for the half year to 30 June 2002 are
unaudited and have been prepared in accordance with the accounting
policies detailed in the annual report for the year ended 31 December
2001 except that the group has adopted FRS19 'Deferred tax', see note 4.
The statements were approved by the Directors on 10 September 2002. The
figures for the year ended 31 December 2001 have been extracted from the
statutory accounts, filed with the Registrar of Companies on which the
auditors gave an unqualified report.
2. Analysis of turnover
2002 2001 2001
First half First half Full year
£ million £ million £ million
By sector
Electronic 176.4 223.4 399.6
Electrical 88.9 119.5 231.1
Continuing activities 265.3 342.9 630.7
Discontinued activities - 25.8 27.2
265.3 368.7 657.9
2002 2001 2001
First half First half Full year
£ million £ million £ million
By origin
United Kingdom 134.2 205.6 368.0
Rest of Europe 55.4 54.8 105.4
North America 48.1 54.5 98.9
Rest of the World 27.6 28.0 58.4
Continuing activities 265.3 342.9 630.7
Discontinued activities - 25.8 27.2
265.3 368.7 657.9
2. Analysis of turnover Continued
2002 2001 2001
First half First half Full year
£ million £ million £ million
By destination
United Kingdom 80.7 125.6 227.2
Rest of Europe 90.7 111.9 202.1
North America 53.9 61.4 115.9
Rest of the World 40.0 44.0 85.5
Continuing activities 265.3 342.9 630.7
Discontinued activities - 25.8 27.2
265.3 368.7 657.9
Discontinued activities in 2001 resulted from the demerger of the glass
container businesses, the sale of the packaging machinery business and
the closure of the copper rod production facility. The figures for the
first half 2001 for turnover and operating profit have been restated to
classify the results of the copper rod production facility as a
discontinued activity.
3. Analysis of operating profit
2002 2001 2001
First half First half Full year
£ million £ million £ million
By sector
Electronic 9.4 23.1 32.9
Electrical 3.7 0.6 3.8
13.1 23.7 36.7
Goodwill amortisation (1.1) (1.1) (2.2)
Continuing activities 12.0 22.6 34.5
Discontinued activities - 1.6 1.5
12.0 24.2 36.0
2002 2001 2001
First half First half Full year
£ million £ million £ million
By origin
United Kingdom 1.2 7.1 6.4
Rest of Europe 5.3 4.9 10.6
North America 3.2 7.6 12.8
Rest of the World 3.4 4.1 6.9
13.1 23.7 36.7
Goodwill amortisation (1.1) (1.1) (2.2)
Continuing activities 12.0 22.6 34.5
Discontinued activities - 1.6 1.5
12.0 24.2 36.0
4. Taxation
Taxation on profit on ordinary activities has been based on the
estimated effective rate for the full year ending 31 December 2002. The
effect of adopting FRS 19 'Deferred tax' is not material.
5. Earnings per share
Basic earnings per share of 4.8p (2001 - 8.6p) are calculated on
earnings of £7.5 million (2001 - £13.4 million) and on 154,798,103
shares (2001 - 154,798,103 shares) being the weighted average number of
shares in issue during the period. The calculation of fully diluted
earnings per share assumes the exercise of dilutive share options
equivalent to 622,226 shares (2001 - 633,955 shares). Earnings per
share before goodwill amortisation and exceptional items are calculated
on earnings of £8.6 million (2001 - £16.5 million) and the weighted
average number of shares in issue during the period.
6. Reconciliation of movements in shareholders' funds
2002 2001 2001
First half First half Full year
£ million £ million £ million
Profit for the period 7.5 13.4 18.9
Exchange differences on net foreign
currency investments (1.3) 1.6 (0.7)
Total recognised gains and losses 6.2 15.0 18.2
Dividends (5.7) (5.7) (15.6)
- ordinary
- in specie - (41.1) (41.1)
Goodwill on demerger and disposals - 14.5 16.1
Net change in shareholders' funds 0.5 (17.3) (22.4)
Opening shareholders' funds 222.1 244.5 244.5
Closing shareholders' funds 222.6 227.2 222.1
7. Reconciliation of net cash flow to movement in net debt
Loans and
finance
Net Short term lease
overdraft Investments obligations Net debt
£ million £ million £ million £ million
Balance at 31 December (72.9) 0.1 (24.4) (97.2)
2000
Cash flow 26.4 1.7 (29.7) (1.6)
Demerger - - 0.2 0.2
Exchange differences (1.7) - 0.1 (1.6)
Other non-cash movements - (0.6) (0.1) (0.7)
Balance at 30 June 2001 (48.2) 1.2 (53.9) (100.9)
Cash flow 37.7 - 0.3 38.0
Exchange differences (1.1) - 1.5 0.4
Other non-cash movements - (1.1) 0.1 (1.0)
Balance at 31 December (11.6) 0.1 (52.0) (63.5)
2001
Cash flow (3.9) - 1.6 (2.3)
Exchange differences 0.7 - (0.2) 0.5
Balance at 30 June 2002 (14.8) 0.1 (50.6) (65.3)
8. Demerger, disposals and closure of businesses in 2001
In 2001 the group demerged its glass container businesses by way of a
dividend in specie. The cost of this dividend was £41.1 million
including £16.3 million of net bank borrowings and also including £14.6
million of goodwill previously written off to reserves. Exceptional
reorganisation costs of £1.1 million arose from the demerger. Last year
the group sold F. D. Sims Limited and United Packaging PLC. The
exceptional loss on sale of these businesses was £2.3 million including
£1.6 million of goodwill previously written off to reserves. The
group's copper rod production facility closed in 2001 incurring an
exceptional cost of £0.7 million, net of a goodwill credit of £0.1
million.
The interim report will be sent to all shareholders on the register.
Copies are available at the Company's Registered Office, Clive House, 12-
18 Queens Road, Weybridge, Surrey KT13 9XB.
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